Why Big Fines Don't Scare Wall Street's Cowboys

A historic $13 billion settlement is in the works between the federal government and JP Morgan -- the biggest-ever penalty for wrongdoing by a bank.

But this settlement is unlikely to deter tomorrow's lawbreakers in finance, and here's why.

First, the people who committed financial crimes at JP Morgan during boom times pulled in huge bonuses thanks to ill-gotten profits -- but no specific individuals at the bank will be asked to pay back a dime of that personal wealth. Instead, current and future shareholders of JP Morgan will bear the brunt of this settlement. And while such costs will reduce profits and bonuses for a while, that doesn't change the fact that great fortunes have already been pocketed and the wrongdoers will keep the money. Human nature suggests that plenty of finance types would be willing to take this same deal down the line: You get rich now, but somebody else who is probably not you picks up the tab, if there ever is a tab.

Second, and related: fines are far, far less scary than criminal indictments and the possibility of going to jail. And, of course, nothing like that is happening here. JP Morgan is being punished for some of the biggest financial crimes in history, yet no actual people will end up with a rap sheet -- or, as is routine, will even be cited by name in the final settlement.

Third, and also related, no heads have really rolled at JP Morgan -- at least heads noteworthy enough to attract attention. Jamie Dimon still has his job even as his bank ponies up a fortune for misdeeds committed under his watch. In short, the wrongdoers not only keep their money and don't face prison time, they also keep their jobs. There is no pain, and also no shame.

Fourth, these giant fines are always, in practice, far less onerous than they look for institutions. The cost is often spread over time and portions of the fine tend to be tax deductible, which may be the case here, as many critics have noted.

So, yeah, get ready for big headlines when the JP Morgan settlement is finalized. But don't bet on much actually changing.